The Environmental Audit Committee (EAC) has issued a damning
verdict of the government’s approach to clean energy investment in recent
years, calling on it to publish an urgent plan to plug looming policy gaps.
And the committee has also issued its withering verdict on
the government’s Clean Growth Strategy, a body of work which it said ultimately
falls short of its aim and must be rectified with urgent policy decisions.
The full Green
Finance report, published this morning, concludes that policy
decisions taken from 2015 onwards have significantly dented investor confidence
in clean energy, resulting in a collapse in total investment.
The report states that there have been “worrying signs that investment
may have stalled in the last two years”, a factor which the committee said was
threatening the country’s ability to meet its fourth and fifth carbon budgets.
The EAC also pointed to figures which showed an alarming
decline in low carbon investment, stating that in cash terms investment fell by
10% in 2016 and a further 56% in 2017. Those drops had sent annual clean energy
investment to its lowest level since 2008.
And this has been further underpinned by sudden changes to
low-carbon policy in 2015 that, the EAC has said, further undermined investor
confidence and led to a swift reduction in the number of renewables projects
brought through to development. This loss of confidence may also have been
exacerbated by the government’s decision to privatise the Green Investment
Bank.
Furthermore, the committee said it was concerned by the
newly-renamed Green Investment Group’s new international focus which it said
could lead to less direct investment in the UK’s green infrastructure.
While the EAC was encouraged by the Clean Growth Strategy,
published last year, it could not avoid mentioning that even if its policies
are delivered in full, it will still lead to a shortfall in meeting the
emissions reductions targets set out to 2032.
It has called on ministers to “urgently plug this policy
gap” and publish a delivery plan capable of securing the investment required to
meet those commitments. And although the committee has stressed the need for
fixed-price contracts to keep costs down, it has gone on to say that HM
Treasury must ensure that any efforts to curb costs must not add to the decline
in clean energy investment.
And interestingly, the report has called for a steadily
rising carbon price which would effectively price out dirtier generation, a
policy which many within the industry have called for in the past. The EAC is
seeking the introduction of an increasing carbon price, starting when the
current freeze ends in 2021, in order to drive investment away from fossil
fuel-based generation.
Other recommendations for the government include the launch
of a consultation prior to the next round of Contracts for Difference auctions,
slated for next year, to explore options for the future of fixed-price
contracts in the early 2020s; explore the creation of partnerships with local
authorities to provide technical and development expertise in financing green
projects; and examine how a sovereign green bond could be directly tied to the
Clean Growth Strategy, to be included in any delivery plan brought forward before
this year’s Budget.
"Long on aspiration, short on detail"
Labour MP Mary Creagh, who chairs the EAC, offered a
withering assessment of the Clean Growth Strategy, arguing that it was “long on
aspiration, but short on detail”.
“The government must urgently plug this policy gap and
publish its plan to secure the investment required to meet the UK’s climate
change targets. It should provide greater clarity on how it intends to deliver
the Clean Growth Strategy by the 2018 Budget, and explore how a Sovereign Green
Bond could kickstart its Clean Growth Strategy,” she said.
The government would, however, appear fully aware that more
work is needed to achieve the aims established in the Clean Growth Strategy. At
the All-Energy conference earlier this month energy and clean growth minister
Claire Perry told an audience of industry professionals that her department was
working to put “more meat on the bones” of the strategy, with further
announcements set to be made.
The EAC’s report has nonetheless been well received by the
industry. James Court, head of policy at the Renewable Energy Association, said
that the report “perfectly chimes” with what many of his association’s members
have been feeling.
“There is a real frustration that at a time of renewable
costs plummeting and other countries steaming ahead, the UK is going backwards.
Government must now move forward quickly by implementing the recommendations of
the Green Finance Task Force that reported back in March.
“Renewables are now cheaper than building new gas and
nuclear generation, yet the decisions of the last three years will have an
impact on not only the UK hitting our climate targets, but whether we will have
a cheaper, cleaner, smarter and future-proofed energy system, and the jobs and
investment that come with that”.
NextEnergy Capital MD Abid Kazim, who has written for
Clean Energy News arguing
for a carbon price similar to that recommended within today’s report,
said: “We believe that taking a long term view to set the price of carbon on a
steady upward trajectory, allied to ensuring that supply companies cannot pass
this cost on to consumers, this will provide the right incentive for energy
supply companies to alter their procurement away from carbon emitters.
“Investment supported by active procurement exists to
support ever lower cost carbon neutral generation.
“Implemented in this way, a truly effective carbon price
will enable our transition to a low carbon economy, both nationally and
globally.”
In response, the Department for Business, Energy and
Industrial Strategy said it would consider the EAC's report and respond
"in due course".
“The UK is a world-leader in cutting emissions, with 50% of
our electricity coming from low-carbon sources and recently going 72 hours
without burning coal.
“We’re committed to meeting our climate change targets and
will have invested £2.5 billion on low carbon innovations by 2021," a
departmental spokesperson said.
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